According to new evidence brought to light yesterday, it appears that Fortescue Metals Group Limited [ASX:FMG] chairman Andrew Forrest has been busted as a hypocrite.
Apparently, Fortescue has registered a shell company in Singapore. Its principal activity is listed as ‘iron ore marketing services’ and ‘trading of iron ore’.
Fortescue CFO Stephen Pearce denied that the company’s purpose was iron ore marketing. He said that ‘The Singapore company referred to was established specifically as the entity by which Fortescue would invest in the China Beijing International Mining Exchange … It has undertaken no other activity’.
If that’s so, choosing the name Fortescue International Marketing seems strange.
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And not listing its ‘real’ principal activities seems odd too.
The Fortescue Singapore office is dormant. They haven’t actually marketed or shifted the profit of their ore through a Singapore office, the way that BHP and Rio have. But the fact remains that it doesn’t look good.
What Forrest said before
In the past month, Forrest has attacked other mining companies for skipping out on their tax obligations. Money Morning Contributing Editor Greg Canavan covered it in this story on Forrest and the iron ore price.
Forrest said that Fortescue paid its fair share of tax in Australia, and it was unfair that other mining companies like BHP Billiton [ASX:BHP] and Rio Tinto [ASX:RIO] didn’t. In an interview on ABC Radio, he said,
‘You’ve [other mining companies] made huge profits and then you’ve funnelled those profits through a tax shelter in Singapore. You’ve taken around a billion dollars in profits, you’re arguing with the Australian Taxation Office, you’re not playing a fair game, either on the iron ore volume, the iron ore price or even on the tax you pay.’
He got together with other iron ore bosses and economists to launch a special campaign. It was based around overproduction and flooding the market. Forrest and co. argued that big mining companies were flooding the market and reducing prices to push out smaller competitors.
He also said part of the reason big companies were able to survive doing this was tax dodging.
He wanted a parliamentary inquiry into iron ore prices. But he didn’t get one.
After PM Tony Abbott said there wouldn’t be an inquiry, Forrest complained. He blamed secret lobbying by the big multinationals.
‘You know, we saw the lobbyists for the multinationals say, when they thought there was going to be an inquiry, say, “Look, we welcome an inquiry so we can clear the air.” But their actions, right, out of the other side of their mouths: their actions were lobbying furiously, flying in plane loads of lobbyists to cover Canberra, to get them to change their decision.’
The ATO didn’t like the idea of BHP and Rio using Singapore as a shelter. They’ve launched action to make them pay millions of dollars in ‘lost’ tax revenue. According to statements from the ATO, using so-called marketing hubs as tax shelters became popular around the time of the mining boom.
Those following the mining tax story will just have to wait to see what Fortescue’s Singapore office was really all about.
Contributor, Money Morning
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